Monday, October 03, 2005

Memo to the New President of Memphis Regional Chamber

Let’s say this as clearly as we can. The status quo is simply not an option. In fact, today, status quo is a Latin phrase meaning failure.

That’s why our city needs innovative, new economic development policies and a culture of creativity to ripple from its Chamber of Commerce. Continuing to do the same will not produce different results. It will merely continue to erode the tax base, create too many low-paying jobs and make Memphis a lonely outpost in the knowledge economy.

Task #1 – Quit selling Memphis on the cheap.

It shouldn’t be surprising that Memphis is seen as a weak market and as a blue collar city. That’s precisely the message that we send to the nation.

We say it when we give away more than $60 million every year for everything from warehouses to call centers to headquarters. In other words, we are so unworthy that we must bribe companies to move here and create new jobs. Any city that gives away hundreds of thousands of dollars for $20,000 a year jobs in a warehouse is saying volumes about its self-worth and its self-image.

Cities like Nashville are generally perceived as positive places to locate and are magnets to young workers precisely because they invest in themselves and are loathe to waive taxes except under exceptional circumstances. They tell any one who will listen that they would be lucky to be part of their city.

Let’s develop strategies that build value so companies are willing to pay to be part of our future. Our current policies do just the opposite.

Task #2 – Exhibit loyalty to Memphis citizens, not just blind loyalty to new businesses.

Memphis’ over-reliance on tax freezes is a detriment to homeowners who pay a disproportionate percentage of property taxes. In the past, in one breath, the Chamber complained about high tax rates, while at the same time, it pushed tax freezes that cause the rate to rise, as business pays less than their fair share.

A few years ago, a consultant hired by city and county governments was developing an evaluation of tax policies such as tax freezes. When the time came for the consultant’s report, he called back to say that his computer had malfunctioned, and he would need more time.

After a few days, he called back again, saying it wasn’t the computer’s fault. It had gone haywire because its program could not fathom a financial model like the one found in Memphis and Shelby County. The hundreds of businesses paying no taxes, particularly the warehouses in Southeast Shelby County, shifted the tax burden disproportionately onto homeowners, and the computer could not process such a model, and it simply shut down, because it assumed that it could not possibly be correct.

Nothing has changed since those days, but it is clearer than ever that they must.

Task #3 – Define success by people, not buildings.

Every year, city and county officials and Chamber executives gather for the press conference announcing that economic development has exceeded $1 billion for the umpteenth year in a row. The fanfare begs the question of why success is being measured in the total amount of construction in the region.

In truth, it seems a measurement that is emblematic of the stranglehold that the development industry has on economic development and public policy in Memphis and Shelby County. But where is the logic in the civic celebration because of $1 billion in construction? After all, in an economy as dominated by warehouses as ours, there are dozens and dozens of buildings built for $20 million that ended up hiring less than two dozen people earning less than $22,000 a year. What exactly are we celebrating?

Let’s change the definitions of success to people-centered measurements – the number of new jobs and above average wages paid for them; the shifts of our fellow citizens from welfare dependency to self-sufficiency; and new brownfield development rather than the sprawl that drives up county debt and drives down county leadership.

Task #4 – Abandon “commodity economic development.”

Memphis’ economic development programs are rooted in our city’s background in commodities. Our heritage as an agricultural center continues with our distribution center mentality. We sell products that tend to be seen as commodities, to a consumer making a decision based on the lowest price. ‘Commodity economic development’ is forever in a race to the bottom to offer the cheapest prices (which of course puts pressure on employee wages to go lower). Cities with commodity mentalities think they can grow their economies with low wages, low land costs, low utilities, low taxes.

In a city with commodities economic development, these are factors that must be controlled to keep prices down. But when Memphis is competing with workers in Southeast Asia, Mexico and Bangladesh, it is an approach doomed to inevitable failure.

Put directly, Memphis economic development strategies must be reinvented. They must be dramatic. They must attract national attention. They must build the economy from inside out, relying primarily on entrepreneurs. After all, more than 75 percent of all new jobsare created by existing Memphis businesses, and rather than spending most of our time hustling for the relocations of new businesses, we need to work on the things that inspire our homegrown businesses to succeed.

Task #5 – Set national standards in economic development.

Memphis is obsessed with best practices. Before we’ll talk about anything, we have to know what other cities are doing, and almost inevitably, our conversation drifts to how we can copy what’s working somewhere else.

It’s time for us to use best practices to become more informed, but to develop our own national standards in economic development. For example, the Chamber should visit Portland as soon as it can to see how a community works together as it does in the Portland Development Agency, a hub for regional thinking, urban development, and entrepreneurial public policy. Most of all, it shows what the public part of the economic development equation should look like. It helps us think of something uniquely Memphis so every one else in the country can copy us for a change.

Task #6 – Don’t wait for the game to come to us.

Economic development has become sophisticated and now operates on a global scale. U.S. Chambers of Commerce have been slow to adjust to these new realities. It’s not enough to print catchy ads, invent cute slogans and send out mounds of news releases. It’s more about defining our own destiny. It’s about listening to provocative national experts, it’s about considering exciting new programs and it’s about exploring new strategies in a knowledge economy.

For example, Memphis once proudly boasted of the two dozen Japanese companies that came to call our city home after Sharp Manufacturing opened its manufacting plant in Southeast Shelby County. These days, Sharp Corporation is one of the hottest companies in the booming electronics business after inventing and investing in Aquos televisions.

Long considered a poor relation to Sony, Matsushita and Samsung, Sharp has suddenly emerged from the shadows and has commandeered the marketplace. It is the perfect symbol for Memphis – from blue collar to overachiever. It is a message that resonates with international business, and yet, it is true to Memphis’ own identity.

Someone from the Chamber should already have flown to Osaka to talk with the president of Sharp Corporation in an effort to renew the strong friendship that once existed between the comapny and our city, exploring new relationships that would benefit both of us. Rather than waiting for someone to answer an ad or to call with a new project, the Chamber should do what business does best - thinking entrepreneurially to capitalize on existing relationships that can be exploited for the good of our economic future.

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